El Salvador: Complaints Over Fiscal Discipline

The governments cash-strapped position is reflected by delays in payments, while it increases short-term public debt and the IMF has suspended the precautionary agreement.

"Public debt in El Salvador between March 2011 and March 2012 increased by $450 million (+4.3%) to $13,232,000. More than half of this increase ($281.6 million) was generated in the first quarter of this year. Because of the debt, the Government has had to resort to issuing short-term debt which has already reached $710.9 million, while the interest rate of Treasury Bills (LETES) has already reached its maximum rate, 4.25%, from the 0.4% it was before", says a report by the Salvadoran Foundation for Economic and Social Development (FUSADES).

Fusades also criticizes poorly targeted subsidies. For example, the state spent $1.856 billion in grants between 2004 and 2011, which would have funded the construction of 10 ports of La Union, thousands of schools and dozens of hospitals.

"It is time for fiscal discipline and to rein in the expenses," said Carolina Franco, Senior Analyst for International Economics, as quoted by Laprensagrafica.com.

Projections by the Ministry of Finance are that the fiscal deficit of El Salvador will be $958 million at the end of the year, or 4% of GDP.

Commenting on the subject the technical secretary of the presidency, Alexander Segovia, said they are expecting a smaller deficit at year end, "I can assure you that it will be less than the 4% that is being predicted".